South Africa: Blockchain: The "Trust Machine" That Africa Needs?

Africa is an ever-increasing source of growth for international
businesses. Previously considered a luxury, it has become a
necessity for those who wish to stay competitive in the global
economy and seize the opportunities offered by the rapid
development of the African interior market.

New technologies play a determining role in this, as they will
enable Africa to go directly from the state of disorganization
which has long prevailed in numerous areas of its economy to a
state of ultimate organization using the latest technology, and
this, with no transition phase. The technological leap will spare
the continent from having to go through the stages where various
technologies replace one another.

Lionel ZINSOU, former Prime Minister of Benin likes to say that
"Economic developments which do not occur anywhere else are
happening in Africa". The "leap frog" phenomenon
described above is the perfect illustration of this. It is
principally in Africa that the future of the telecommunications and
banking sectors will be played out. The technology will determine
which of the two sectors will reap the most profit. The
"ORANGE MONEY" project clearly shows how this
telecommunications group (who by its turnover is becoming more and
more African) plans to rock the boat in the banking sector.

However, other technological breakthroughs have appeared on the
horizon and should also accelerate economic development in
Africa.

Among them, it is important to note blockchain. This technology
gave rise to the Bitcoin revolution and money can now be sent in
the same way as an SMS, without going through a financial
institution. Each transaction is registered in the blockchain, a
freely accessible public register, and stored in a decentralized
manner, without intermediation by third parties.

Examples of African countries where Bitcoin is gaining ground
include Kenya and Uganda where it is used generally for money
transfers. And, in South Africa, the Standard Bank has already
tested a clearing platform in Bitcoins.

Modern blockchains, starting with the Ethereum blockchain, have
increased the types of possible use for this distributed ledger by
making it completely programmable. The automatic exchange of
crypto-currency or other digital assets thus becomes possible,
along with the automatic and transparent processing of proof of
existence of documents.

Beyond its crypto-currency uses, blockchain could thus bring
much more to Africa, for example: the credibility of real estate
deeds is a significant factor and can either help or hinder
economic development. Where these documents lack credibility,
individual investments in the properties concerned will obviously
be limited. The situation impacts the entire economy, which suffers
as a result of these legal uncertainties.

In Africa, the lack of a trustworthy land and property register
is a major obstacle to the economic development of the continent.
Indeed, in a majority of African countries, over 90% of rural areas
are not registered.

In this context, the creation of virtual land and property
registers using blockchain technology could give African land
titles the credibility they currently lack by guaranteeing their
trustworthiness. Initiatives in this respect have begun in Ghana
and are sure to increase throughout the continent.

The possibility of accessing a virtual register, open to all,
which lists the successive operations concerning an individual
property (identified by its GPS coordinates) and the existence of
any disputes concerning its ownership, should make it possible to
accelerate real estate transactions on the African continent.

Once the deeds are secure, it will obviously be easier for banks
to accept them as collateral and grant loans on this basis.

The example of the land register can be extended to other types
of use. Blockchain can be used to support numerous projects:
management of an identity registers, intellectual property, energy
sharing, automatic payment clearing...

The success of this technology in Africa will require that the
public authorities make the investments necessary to enable
efficient exploration and use of this technology by the economic
players in Africa. This would make an excellent project for the
World Bank and, in particular the African Development Bank
("ADB").

Admittedly, Blockchain technology currently has its limits.
Firstly, it is still under development. Although the essential
technical foundations have been widely tried and tested on the
Bitcoin blockchain (signature and security of transactions, public
accessibility and immutability of the chain), the more complex
protocols are still being developed (starting with the Ethereum
blockchain). These technologies also suffer, in general, from a
number of teething problems (issues with processing a large number
of transactions, energy-intensive, complex technology, etc.).

In addition, the lack of a true legal framework, apart from a
few exceptions, is a real obstacle to the implementation of the
types of use identified. Estonia (where a complete body of rules is
being prepared) is the principle exception which proves the rule.
In this respect, questions arise concerning the means of proof for
blockchain transactions, the precise legal status of
crypto-currencies, or the governing law rules which would apply to
contracts where the parties do not reside in the same country, the
contract is made in yet another country, and the property in
question is located in an altogether different country.

The creation of a specific legal framework will be necessary,
but this will take time. Given the potential of this technology, it
is unlikely that the economic players will wait; they will call
upon legal practitioners who will use the existing legal tools to
define the phenomenon and the various types of use, even where
these existing tools may not be entirely suited to the job.

The content of this article is intended to provide a general
guide to the subject matter. Specialist advice should be sought
about your specific circumstances.

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